ReportWire

Tag: mortgage

  • What percentage of your income should go toward your mortgage

    What percentage of your income should go toward your mortgage

    [ad_1]

    When it comes to finding the right balance between saving, spending, and investing, one of the biggest questions many people face is how much of their income should be allocated to their mortgage. It’s a decision that impacts your overall financial health and well-being. While there’s no one-size-fits-all answer, understanding general guidelines and how they apply to your personal situation can help you make the best decision. In this article, we’ll explore recommendations and practical tips to help you determine a mortgage budget that works for you.

    Interested in making a move? Check out spots in these markets: 

    Apartments for rent in Las Vegas, NV | Houses for rent in Jacksonville, FL | Homes for sale in Huntsville, AL

    How to calculate your monthly percentage?

    There are several recommendations on what percentage works best but it is necessary to make a decision based on your situation. Below are the most recommended percentages on which to base your mortgage payments.

    28% / 36% Rule

    A widely used guideline for budgeting your mortgage is the 28/36 rule. According to this rule, your mortgage payment should not exceed 28% of your gross monthly income. This percentage covers the principal, interest, property taxes, and homeowners insurance. 

    Additionally, the rule suggests that your total debt payments, including your mortgage, credit cards, and other loans, should not exceed 36% of your gross income. This approach helps ensure you have enough room in your budget for other expenses and savings. Using this example, if you make $7,000 monthly your max mortgage payment should be $1,960. 

    25% Rule

    Some financial advisors recommend a more conservative approach, suggesting that your mortgage payment should be no more than 25% of your gross monthly income. This lower percentage provides a larger cushion for unexpected expenses and can help you maintain a comfortable lifestyle without stretching your finances too thin. This rule is particularly useful for those who prefer to err on the side of caution or who have other significant financial commitments. Using this percentage, if you make $8,000 monthly your expected mortgage payments should be $2,000. 

    30% Rule

    In certain regions or housing markets, the 30% rule is commonly cited. This rule allows up to 30% of your gross income to be allocated toward your mortgage payment. A higher percentage might be more applicable in areas with high property values or higher living costs. However, it’s important to consider that spending more than 30% of your income on your mortgage can limit your flexibility in managing other financial goals and expenses.

    Which is best?

    Ultimately, the percentage of income that should go toward your mortgage varies based on your financial situation. Factors such as your overall debt levels, savings, and personal financial goals play a significant role. Regardless of which rule you follow, the key is to balance your mortgage payment with your other financial responsibilities and goals. Make sure to account for future expenses, potential income changes, and savings goals. By maintaining a well-rounded budget and regularly reviewing your financial situation, you can ensure that your mortgage remains a manageable part of your overall financial plan.

    How do lenders determine your home affordability?

    When lenders assess your home affordability, they evaluate a variety of factors to determine whether you can comfortably manage mortgage payments alongside your other financial obligations. Here’s a breakdown of what lenders typically consider:

    Credit score

    Your credit score is one of the most important factors lenders examine. It reflects your creditworthiness and financial responsibility based on your credit history. A higher credit score generally indicates that you’re a lower-risk borrower, which can improve your chances of securing a mortgage and potentially lead to better interest rates. Lenders typically look for a score of at least 620, but higher scores are preferable.

    Debt-to-income ratio (DTI)

    The debt-to-income ratio is a key metric lenders use to evaluate how much of your monthly income goes toward debt payments. It is calculated by dividing your total monthly debt payments by your gross monthly income. Lenders generally prefer a DTI ratio below 43%, although some may be flexible depending on your overall financial situation. This ratio helps lenders assess your ability to handle additional debt responsibly.

    Income and employment history

    A stable and sufficient income is crucial for mortgage approval. Lenders will review your employment history to ensure you have a reliable source of income to support mortgage payments. They typically look for a steady job history, ideally at least two years in the same job or industry. Documentation such as pay stubs, tax returns, and employment verification may be required to substantiate your income.

    Down payment

    The size of your down payment affects how much you need to borrow and can influence your mortgage terms. A larger down payment reduces the loan amount and can lower your monthly payments and interest rates. Most conventional loans require a down payment of at least 20% of the home’s purchase price, though there are options available with lower down payments, such as FHA or VA loans.

    Assets and savings

    Lenders also consider your assets and savings to gauge your financial stability. This includes checking and savings accounts, retirement accounts, and other investments. Adequate reserves demonstrate that you have financial cushioning for emergencies and can cover other expenses beyond the mortgage, such as closing costs and home maintenance.

    Loan type and terms

    Different types of loans have varying requirements and terms. Conventional loans, FHA loans, VA loans, and USDA loans each have their own criteria and benefits. The loan type you choose will influence your interest rate, down payment requirements, and other aspects of the mortgage. Lenders will evaluate how these terms align with your financial profile.

    By considering these factors, lenders aim to determine whether you are financially prepared for homeownership and capable of managing the responsibilities of a mortgage. It’s a comprehensive evaluation designed to ensure that you can comfortably afford your new home while maintaining overall financial health.

    Advice on how to lower your monthly mortgage payments

    These strategies can help you reduce your mortgage costs, save money, and achieve financial stability more quickly. Each option has its benefits, so consider your financial situation and long-term goals when deciding which strategies to pursue.

    • Refinance your mortgage:  Refinancing your mortgage can be a powerful way to reduce your monthly payments and overall interest costs. By securing a lower interest rate, you can decrease your monthly payment and potentially shorten the term of your loan. Be sure to compare refinancing offers, including any fees or closing costs, to determine if it’s the right move for you.
    • Make a larger down payment: If you’re in a position to do so, increasing your down payment when purchasing a home can reduce the size of your mortgage loan, thereby lowering your monthly payments and the total interest paid over time. A larger down payment also can help you avoid private mortgage insurance (PMI), which adds to your monthly costs.
    • Consider the loan terms: Opting for a shorter loan term, such as a 15-year mortgage instead of a 30-year mortgage, can save you a significant amount in interest over the life of the loan. While your monthly payments will be higher, the total interest paid will be lower, and you’ll own your home outright sooner. Or you can opt for extending the term of your mortgage reducing your monthly payments. By lengthening the loan term from, for example, a 15-year mortgage to a 30-year mortgage, you spread the repayment of your principal and interest over a longer period. This adjustment decreases the amount you pay each month.
    • Make Extra payments: If possible, paying extra towards your mortgage principal can significantly reduce the total amount of interest you pay over the life of the loan. You can make extra payments on a monthly, quarterly, or yearly basis, or even just add a little extra to each payment. Consider rounding up your payments or making occasional lump-sum payments whenever possible.

    What percentage of income should go to a mortgage: The key takeaway 

    Determining what percentage of your income should go toward your mortgage is a necessary aspect of managing your finances effectively. While guidelines such as the 28/36 rule, 25% rule, and 30% rule provide valuable starting points, the right percentage for you will depend on your unique financial situation. 

    By carefully considering factors such as your credit score, income, debt, down payment, and the overall balance of your budget, you can find a mortgage payment that fits comfortably within your financial plan. Regularly reviewing and adjusting your mortgage strategy — whether through refinancing, making extra payments, or lengthening the loan term — can help you stay on track and make informed decisions. Ultimately, the goal is to ensure that your mortgage payments are manageable and sustainable with your financial goals.

    [ad_2]

    Pablo Alvarez

    Source link

  • How Much Does Interest Rate Affect Monthly Payment? You Asked, We Answered.

    How Much Does Interest Rate Affect Monthly Payment? You Asked, We Answered.

    [ad_1]

    For those looking to move from an apartment in Glendale, California to a home in Sherman Oaks or outside the state, mortgage interest rates are a crucial factor to consider. These rates directly impact the monthly payments you’ll make on your loan. How much does interest rate affect monthly payment? You might be asking, especially now that interest rates have finally decreased. We’ll answer that and more here. 

    Understanding how interest rates work and how they can affect your finances is essential for making informed decisions about homeownership. In this Redfin article, we’ll explore the basics of mortgage interest rates, how they influence your monthly payments and strategies for managing them. Now, let’s get started.

    1. Understanding interest rates

    First, let’s talk about what interest rates are and how they work.

    Mortgage interest vs principal

    When you take out a mortgage, you borrow money from a lender to purchase a home. In return, you agree to repay the loan over a set period, plus interest. The principal is the original amount you borrowed, while the interest is the additional cost you’ll pay for using the lender’s money.

    Fixed-rate mortgage vs adjustable-rate mortgage

    There are two main types of mortgage interest rates: fixed-rate and adjustable-rate.

    • A fixed-rate mortgage has an interest rate that remains the same throughout the life of the loan. This means your monthly payments will be consistent.
    • An adjustable-rate mortgage (ARM) has an interest rate that can change over time, typically based on a specific index. This means your monthly payments could increase or decrease depending on market conditions.

    Non-qualified mortgage loans

    Non-QM (non-qualified mortgage) loans are a type of mortgage that doesn’t meet the strict underwriting guidelines established by Fannie Mae and Freddie Mac. These loans are often offered to borrowers who may not qualify for traditional mortgages due to factors such as a lower credit score, higher debt-to-income ratio, or unconventional income sources. 

    Nicholas Hiersche, president of The Mortgage Calculator in Miami, Florida shares, “Although non-QM loans typically come with higher rates, the flexible income guidelines enable borrowers to qualify with more income, providing an essential option when conventional rates are out of reach.”

    2. The impact of interest rates on mortgage payments

    The interest rate on your mortgage directly affects your monthly payment. A higher interest rate means you’ll pay more in interest over the life of the loan, resulting in higher monthly payments. Conversely, a lower interest rate means you’ll pay less interest, leading to lower monthly payments.

    Ryan Leahy, senior loan officer for Leahy Lending shares that “Even a small change can significantly impact the overall cost of your loan.” Leahy adds, “Homebuyers should know that a 1% interest rate drop can increase their buying power by 10%, allowing them to afford more home for the same monthly payment.”

    To illustrate this, let’s consider two hypothetical scenarios:

    • Scenario 1: You take out a $300,000 mortgage with a 30-year fixed interest rate of 5%. Your monthly payment would be approximately $1,610.
    • Scenario 2: You take out the same $300,000 mortgage but with a 30-year fixed interest rate of 4%. Your monthly payment would be approximately $1,432.

    In this example, a 1% difference in interest rates results in a monthly savings of $178. Over the life of the loan, these savings can add up significantly.

    3. Strategies for managing interest rates

    Want to take advantage of interest rates in this current market? Let’s look at factors that impact rates and how to negotiate. 

    Factors that can lower interest rates

    Several factors can influence the mortgage rate you’ll receive on your mortgage and without a doubt you’re likely shopping to get the best mortgage rate. Factors that can lead to lower interest rates include:

    • Credit score: A higher credit score generally leads to a lower interest rate. For those looking to improve their credit scores, Roland Wilcox with Sierra Capital Mortgage in Pasadena, California suggests “consistently paying bills on time, keeping your credit card balances below 30% of your credit limit, maintaining older accounts, and diversifying your credit cards.”
    • Down payment: A larger down payment can also help you secure a lower interest rate.
    • Loan term: Longer loan terms often result in lower monthly payments but higher overall interest costs.
    • Mortgage type: Certain mortgage types, such as government-backed loans, may offer lower interest rates.

    Negotiating your interest rate

    It’s worth negotiating with your lender to see if you can secure a lower interest rate. They may be willing to offer a better deal, especially if you’re a strong borrower with multiple offers from other lenders.

    Refinancing your mortgage

    If interest rates have dropped significantly since you took out your mortgage, refinancing may be an option. This involves taking out a new loan to pay off your existing mortgage. If the new interest rate is lower, you can potentially reduce your monthly payments.

    How much does interest rate affect monthly payments: Some final thoughts

    Understanding how mortgage interest rates work is essential for making informed decisions about your homeownership. By understanding the factors that influence interest rates and exploring strategies for managing them, you can save money on your monthly mortgage payments over the long term.

    [ad_2]

    Marcello Kline

    Source link

  • Variable mortgage rates regaining traction as Bank of Canada cuts rates – MoneySense

    Variable mortgage rates regaining traction as Bank of Canada cuts rates – MoneySense

    [ad_1]

    Are more rate cuts likely?

    In announcing the rate cut Wednesday, Bank of Canada governor Tiff Macklem said if inflation continues to ease broadly in line with the bank’s July forecast, it is reasonable to expect further cuts in the policy rate. 

    Julie Leduc, a mortgage broker at Mortgage Brokers Ottawa, said clients with variable-rate loans were not happy when rates were rising, but the cycle is turning. 

    “We’ve lived the worst of it, we’re on our way out,” she said. 

    “So let’s look for the benefits and the benefit is, if they go variable and the rates go down, they’re going to live the benefit.”

    Right now, the rates offered to those looking for a new variable-rate mortgage or needing to renew are higher than those being offered for five-year fixed rate mortgages, something that Leduc called an anomaly.

    That’s because the expectations are that the Bank of Canada will continue to cut interest rates, lowering the amount charged to borrowers in the future. If something unexpected happens and the central bank doesn’t cut rates, then the rates charged on variable-rate mortgages won’t go down.

    What to expect if you’re mortgage holder

    But if things continue to roll out as expected, those choosing variable-rate loans will see the amount they are charged go down. Just how much and how quickly will depend on the central bank.

    Sojonky says the discounts lenders offer to the prime rate for variable-rate mortgages are also improving. 

    [ad_2]

    The Canadian Press

    Source link

  • What is porting a mortgage in Canada—and when should you do it? – MoneySense

    What is porting a mortgage in Canada—and when should you do it? – MoneySense

    [ad_1]

    But picking a fixed mortgage rate can be problematic if you decide to sell your house and are forced to break your mortgage contract in the middle of your term. The penalties associated with breaking a fixed-rate mortgage can be very costly. 

    Thankfully, many mortgage lenders allow you to avoid penalties by porting your mortgage, which means carrying your existing term and interest rate to your new property. 

    So, how does porting a mortgage work, and when does it make sense? 

    You’re 2 minutes away from getting the best mortgage rates in CanadaAnswer a few quick questions to get a personalized rate quote*You will be leaving MoneySense. Just close the tab to return.

    What is porting a mortgage? 

    Porting a mortgage refers to taking your current mortgage and transferring it to a new property when you move. Your existing mortgage rate and term are transferred along with your current mortgage balance. 

    To qualify for a mortgage port, you must follow certain rules. For example, you must sell your home and purchase a new one at roughly the same time—usually within 30 to 120 days, depending on the lender. Also, you can’t port more than your current mortgage amount. If you need additional funds to purchase your next home, the new money will be subject to current interest rates and added to the mortgage balance—but more on that later. 

    Most Canadian mortgage lenders offer portability as an option, but not all do. That’s why it’s important to find out if a prospective lender offers this feature before you take out a new mortgage. After all, you never know when your plans might change and you need to sell your home before your mortgage term ends.

    When does it make sense to port a mortgage?

    There are two main reasons you would want to port your mortgage instead of breaking your contract and starting fresh. The first is to keep your existing interest rate if it’s lower than current mortgage rates. The second is to avoid breaking your mortgage early and incurring a costly penalty. 

    “Porting is typically a good idea if your existing fixed mortgage rate is lower than current rates and you’re moving before your mortgage maturity date,” explains Lyle Johnson, a Winnipeg-based mortgage broker. “By keeping your existing mortgage, you avoid the prepayment penalties that would apply if you break your mortgage before its maturity date, while keeping your low fixed rate.” 

    What about a variable-rate mortgage? Most variable mortgages do not offer a portability feature. (Note, however, that you may have the option to convert to a fixed rate first, and then port.) If you decide to sell your house before your term expires, you’ll likely need to break your contract and obtain a new mortgage for the new property. That said, the penalty for breaking a variable mortgage is usually equal to three months’ interest on your outstanding balance, which is often less than a fixed-rate mortgage penalty. 

    [ad_2]

    Colin Graves

    Source link

  • The after-effect of market lows: a drop in fixed mortgage rates – MoneySense

    The after-effect of market lows: a drop in fixed mortgage rates – MoneySense

    [ad_1]

    Bond yields have a “positive correlation” with fixed mortgage rates. That means when bond yields go up, so do fixed-rate mortgages, and vice versa. And since Canadian five-year government bond yields have dropped to 2.9%, as of Tuesday, mortgage rates are expected to come down, too. 

    What are bonds?

    Bonds are a form of debt security. Governments and corporations issue bonds to borrow money from investors. The amount borrowed is referred to as the bond’s face value or par value.

    Interest is paid on the face value to reward investors for lending their money. The rate may be fixed—constant over the duration of the bond—or variable, changing over time in response to changes in a benchmark interest rate such as the prime rate.

    Bonds are commonly referred to as fixed-income securities regardless of whether their interest rates are fixed or variable. 

    Read “What are bonds?” from the MoneySense Glossary.   

    The effect on bonds

    According to Ratehub.ca (Ratehub Inc. owns both Ratehub.ca and MoneySense), fixed mortgage rates are on their way down. 

    “Bond markets have dropped in response to yesterday’s massive stock sell-off, and are now at 2.97%, a low not seen since June 2023, and also marking a 20-basis point drop in the span of a week,” says mortgage expert Penelope Graham of Ratehub.ca. “That will certainly prompt additional discounts for fixed mortgage rates, on top of the lower rates we’ve seen hit the market in recent weeks.”

    The effect on mortgage rates

    Bond yields have been trickling down for a bit now. With the recent Bank of Canada (BoC) interest rate cuts on June 5 and July 24, yields have hovered around 3.3%, which hinted at a drop in fixed mortgage rates. And yesterday’s investor sell-off indicated lack of confidence from investors. So, where do mortgage rates sit?

    “Right now, the lowest insured five-year fixed mortgage rate is 4.29%, which is the lowest a five-year term has been since last May,” says Graham. “With further decreases expected, it’s a good idea for mortgage shoppers and renewers to look into their rate hold options, which would guarantee them today’s lows for up to 120 days.”

    Check this table to see how mortgage rates are reacting.

    powered by

    Will things be more affordable? Maybe, for now

    As for the market, some investors are relieved to see stock prices drop, namely those of technology companies, including the Magnificent 7, which have had a mixed bag of earnings this quarter. It’s not only made fixed mortgages, but also some sought-after stocks, more affordable.

    Read more about fixed mortgage rates:



    About Lisa Hannam


    About Lisa Hannam

    Lisa Hannam is the editor-in-chief at MoneySense.ca. She is an award-winning editor with over 20 years of experience in service journalism.

    [ad_2]

    Lisa Hannam

    Source link

  • Making sense of the Bank of Canada interest rate decision on July 24, 2024 – MoneySense

    Making sense of the Bank of Canada interest rate decision on July 24, 2024 – MoneySense

    [ad_1]

    What is the Bank of Canada’s interest rate?

    This latest decrease brings the central bank’s rate—which sets the benchmark for Canada’s prime rate and variable-rate borrowing products—to 4.5%.

    Combined with last month’s decrease, the benchmark cost of borrowing in Canada is now down 0.5% and is at its lowest since May 2023.

    What does the rate cut mean? Will the interest rate cuts continue?

    In the immediate aftermath of today’s rate cut, Canada’s prime rate will decrease from 6.95% to 6.7%, with consumer lenders passing that discount onto their prime-based products, including variable mortgage rates and home equity lines of credit (HELOCs).

    While the outcome of today’s BoC announcement was expected—markets had priced in an 80% chance of a cut—the language in the central bank’s news release was surprisingly cheerful. The central bank usually keeps its cards close to its chest in terms of future cuts, but it wasn’t afraid to come across more dovish today, pointing to the progress made thus far on inflation.

    It noted its preferred Consumer Price Index (CPI) “core measures” (called the CPI trim and median) have both trended under 3% in the last few months. The BoC also suggested that inflation will settle around 2%—the target the central bank wants to see—by 2025.

    That translates to more cuts to come. The question now, though, is whether another quarter-point cut will come in September and/or December. And, of course, just how many more cuts will come in 2025. 

    Currently, analysts believe the BoC’s cutting cycle will bottom out at 3%, which would require another six quarter-point cuts. 

    Of course, the BoC maintains that future cuts will depend heavily on inflation, stating, “Monetary policy decisions will be guided by incoming information and our assessment of their implications for the inflation outlook.” That means the markets will be watching upcoming CPI reports like a hawk. 

    What does the BoC rate announcement mean to you?

    …if you’re a mortgage borrower

    Renewing or borrowing, this is good news for Canadian home owners.

    The impact on variable-rate mortgages

    If you’ve stuck it out this far with a variable mortgage rate, you’re being rewarded today. As a result of today’s rate cut, your mortgage rate and payment will lower in kind immediately, if you’re in an adjustable-rate mortgage. If you’ve got a variable mortgage rate with a fixed payment schedule, more of your payment will now go toward your principal mortgage balance, rather than servicing interest.

    [ad_2]

    Penelope Graham

    Source link

  • 6 things to consider before borrowing from the Bank of Mom and Dad for your first home – MoneySense

    6 things to consider before borrowing from the Bank of Mom and Dad for your first home – MoneySense

    [ad_1]

    Before locking into a familial loan, both parties must assess whether they are on the same page and are in a position to take on this type of agreement—along with knowing the power and relationship dynamics that could come with it. Here are six key considerations when borrowing from the Bank of Mom and Dad for your first home.

    1. Is it a gift or is it a loan?

    Determine if the financial help you’re discussing with your family is a gift or a loan. “Make sure there’s good communication with regard to the parent and the child about the nature of this,” explains Nicholas Hui, P.Eng, CFP,  an advice-only Financial Planner at VAVE Financial Planning. “Is it a gift, or is it a loan? If it’s a gift, then I highly recommend having a ‘gift deed.’ A loan could be set up with some type of contract with payment terms and then seek legal advice to make it rock solid.” (More on gift deeds in a sec.)

    If it’s a gift

    If your parents gifted you money toward the down payment for your home purchase, then your mortgage lender may need proof of a gift deed or gift letter. In Canada, a gift deed is a legal document that transfers ownership of a property or asset from one party to another without exchanging money. This document confirms that the down payment amount from your parents is truly a gift and not a loan, which helps your lender verify the source—and nature—of the funds.

    Hui also suggests discussing with your family whether it’s part of an early inheritance and, if not, whether other siblings should be informed to prevent future miscommunication over the division of assets, especially after your parents pass away.

    If it’s a loan

    If you’re considering a loan from a family member, discuss interest. If your parents decide to charge interest, it’s not necessarily a bad thing. For one, it could be beneficial to keep those funds “in the family” and support the Bank of Mom and Dad instead of a financial institution or mortgage company. And you’ll likely benefit, too, if the agreed-upon interest rate is less than prime. 

    Hui says parents could consider using the prime rate of Canada as a guideline (currently 6.95%) and then go a little lower or higher than that—but he says it’ll depend on the dynamics, loan amount and other factors. 

    Whether interest will be charged or not, Hui suggests having all aspects of the agreement—repayment timeline and terms of the loan—put in writing so everyone is on the same page.

    2. Consider the tax implications 

    While there’s currently no “gift tax” in Canada, there are some tax implications to be mindful of. Interest charged on a loan is taxable income, so your parents will need to know that. “Like any investment, they’re loaning money to their child. If you pay them ‘income’ for that loan, it’s taxable,” Hui says.

    [ad_2]

    Alicia Tyler

    Source link

  • Should you get a 30-year mortgage?  – MoneySense

    Should you get a 30-year mortgage?  – MoneySense

    [ad_1]

    What to see the difference in a 25-year versus 30 year mortgage? Tap the filter icon on the far right to expand the data fields. Change the amortization to 25-year or 30-year mortgage (second from the right, second row).

    powered by

    The pros and cons of a 30-year mortgage

    Signing up for a 30-year mortgage allows a buyer to stretch their mortgage payments over a longer period of time. “You’re spreading your debt over five extra years [compared to 25-year mortgages]. That usually gets you a higher purchase price or mortgage amount that’s needed in the big markets,” explains Verceles.

    On a home selling for $699,117 (the average Canadian home price as of May 2024), a buyer who puts 20% down and takes out a 30-year mortgage at a five-year fixed rate of 4.99% will pay $2,982 a month on their mortgage. (You can run the calculations yourself using a mortgage payment calculator.) Another buyer with the same down payment and mortgage terms but a 25-year amortization would shell out $3,250—that’s $268 more than the first buyer every month, or an extra $3,216 a year. 

    At first glance, the 30-year mortgage seems like the better choice—except that the buyer would end up paying a total of $514,068 in interest over the life of the mortgage, assuming rates did not change. The 25-year mortgage buyer, on the other hand, would pay $415,615 in total interest—a difference of $98,415 on the same mortgage principal. 

    In Canada, a 30-year mortgage is not insurable through the CMHC, meaning a minimum 20% down payment is required, unless it is for a new build as outlined above. Even with the new change around 30-year mortgages, this can make it more difficult to purchase the home that you want. A 15% down payment on a $748,450 house is $112,268. At 20%, the down payment jumps to $149,690—meaning you will need to access $37,422 more.

    Plus, Verceles says, mortgage lenders tend to give borrowers slightly better rates for mortgages covered through CMHC insurance, because the lender isn’t the one shouldering the risks of a default. Usually, those savings can amount to a quarter of a percent in interest, according to Verceles.

    Pros

    • Ability to stretch mortgage payments over a longer period of time
    • Access to a higher purchase price or mortgage amount

    Cons

    • More interest paid over the term of the mortgage compared to shorter terms
    • Not insurable through the CMHC, which could mean paying a higher interest rate
    • A minimum 20% down payment is required
    You’re 2 minutes away from getting the best mortgage rates in CanadaAnswer a few quick questions to get a personalized rate quote*You will be leaving MoneySense. Just close the tab to return.

    Can you get a mortgage of more than 30 years?

    In some countries, such as Japan, mortgages with terms of 35, 40 and even 100 years are not unheard of. The long term mortgages are intended to be paid over multiple generations. Canada’s major lenders once offered 40-year mortgages, but that ended when the North American housing bubble burst in 2008. Shortly after that meltdown, Canada’s Department of Finance decreased the maximum amortization to 35 years, then later reduced it to 30 years.

    “They don’t want people to leverage themselves too far,” Verceles explains. (Some alternative lenders still offer 35- and even 40-year mortgages, albeit with steeper interest rates than a shorter mortgage from a bank.)

    Widespread concern about housing affordability in Canada have made the idea of longer amortization periods more attractive to homebuyers, but Verceles says he isn’t sure whether the Canadian government will loosen rules to allow 30-plus-year amortizations again. But given the importance of real estate to Canada’s economy, it’s possible that the federal government may to ease the financial burden of homebuyers by letting them spread out their payments over a longer period of time.

    [ad_2]

    Brennan Doherty

    Source link

  • Is a vacation home a good investment? – MoneySense

    Is a vacation home a good investment? – MoneySense

    [ad_1]

    Sometimes, emotions are the motivation for buying a vacation property. I like to evaluate a property purchase from a financial point of view as well—and here’s how. 

    The costs of buying a vacation property

    Say, a property’s purchase price is $500,000. Whether you use cash, a mortgage/home equity line of credit, or a combination of the two, there are other costs to consider.

    If you purchase with cash that you could otherwise invest for a 4.5% return (to use a conservative assumption), there is an opportunity cost of not investing that money or leaving it invested. If you borrow money, there may be an interest cost of 4.5%. So, to keep it simple, we will assume an opportunity cost or financing cost of 4.5%. 

    Property taxes, utilities, insurance, condo fees, and maintenance could easily add another 2% to 4% per year in costs. Those costs could be even higher for an older cottage or for a property with amenities and high fees, but we will assume 3% per year for discussion purposes.

    So far, our costs are up to 7.5% per year on a $500,000 property, which works out to $37,500 per year for our notional vacation property. 

    You’re 2 minutes away from getting the best mortgage rates in CanadaAnswer a few quick questions to get a personalized rate quote*You will be leaving MoneySense. Just close the tab to return.

    Expected returns on vacation properties

    What about the financial return from owning the property? Canadian real estate prices have risen by about 6.3% per year for the 10 years, ending Dec. 31, 2023. Over the past 30 years, the increase is about 5.1%. Some cities have seen much higher growth rates, and others much lower. Prices have also cooled off significantly in the past couple of years. (Check out MoneySense’s guide on where to buy real estate in Canada.)

    Over the long run, in the U.S., real estate prices have risen just slightly more than inflation. In fact, since 1890, U.S. real estate has increased by less than 0.6% per year above the rate of inflation. Given the Bank of Canada’s 2% inflation target, despite a recent spike in the cost of living, I would argue a more reasonable long-term growth rate for real estate is 2% to 3%.

    So, we will assume the value of our notional $500,000 property grows at 3% per year; in the first year, that would be $15,000. That means the net cost in year one of owning the property is 7.5% (or $37,500) minus 3% (or $15,000), totalling 4.5% (or $22,500).

    Buying versus renting a vacation home 

    If you are contemplating a $500,000 vacation property purchase, and you think my assumptions are reasonable, you need to ask yourself: Are you going to get $22,500 worth of use out of the property? Could you rent a comparable property for less than $22,500 per year, for the time you plan to use it? If you could, a vacation property purchase may not be the best financial choice.

    [ad_2]

    Jason Heath, CFP

    Source link

  • 3-year versus 5-year mortgage: How to choose your term – MoneySense

    3-year versus 5-year mortgage: How to choose your term – MoneySense

    [ad_1]

    Whether or not a variable-rate mortgage is a good option for you depends largely on market fluctuations. Rates for this type of mortgage are typically lower than those of fixed-rate mortgages, which is a win as long as the prime rate doesn’t go up too much. And historically, they’ve tended to average out to lower payments over time. But the past few years have reminded Canadians that huge increases are possible, and home owners who signed on for a variable-rate mortgage pre-2022 have been waving goodbye to an extra several hundreds or thousands dollars every month for the past year and a half. For some, though, these increases are unmanageable and can lead to a potentially dire financial situation.

    What is a 5-year mortgage?

    A five-year fixed mortgage allows you to lock into a specified interest rate for a full five years. Just like with a three-year term, you don’t have to worry about changing markets affecting your payments for the duration of the contract. This is very appealing to home owners with less tolerance for risk—it’s a nice, long period of predictability. It also means much longer stretches between dealing with the headache of renegotiating. 

    Being locked in for longer, however, puts you in a less flexible situation. If interest rates drop, you won’t be able to take advantage of those lower rates—unless you decide to break your mortgage early, a decision that comes with hefty penalty. Or if your financial situation changes or you want to sell your property sooner than anticipated, that five-year commitment is a bit of a roadblock. 

    With a five-year variable mortgage, your payments will change according to the whims of the market. Usually, variable mortgage rates are lower, but since currently they will likely give home owners greater savings over their mortgage term, they’re higher than fixed-rate mortgages.  

    Where are interest rates headed? 

    The soaring interest rates of the past couple of years have been a significant stressor on millions of home owners and would-be home owners across Canada. While early 2024 has seen inflation cool, the prime rate, which is currently at 6.95%, has come down only slightly from its recent high of 7.2%. Economists expect June’s BoC interest rate cut will be followed by gradual decreases over the next few years. Most predictions suggest we’ll reach a full 1% drop by the end of the year with rates stabilizing at 5.2% by the end of 2027. Check out the latest rates.

    powered by

    Deciding on a mortgage term

    So, what does this mean when it comes to choosing a mortgage? If the predictions are accurate, a variable-rate mortgage is a great way to take advantage of the downward trend and save some money. Just be sure there’s enough room in your budget to cover higher payments should there be any rate hikes. Five-year variable mortgages are currently being offered at lower rates than three-year variable loans, which could make them the winning choice. 

    However, if any level of risk is the kind of thing that keeps you up at night, a three-year fixed-rate mortgage could be a better option—there’s no unpredictability when it comes to that monthly payment, and interest rates will most likely have decreased quite a bit by the time you have to renew. A five-year fixed may not be the best choice right now, as you’ll get locked into higher payments at a time when interest rates are going down. 

    Rate decreases aside, the decision largely comes down to your future plans—are you holding on to your property for the long term or do you want to keep your options open?—and your appetite for risk. Find your comfort zone and a plan that works for you.

    Read more about mortgages in Canada:


    [ad_2]

    Ciara Rickard

    Source link

  • Where to buy a home for under $1 million in Canada – MoneySense

    Where to buy a home for under $1 million in Canada – MoneySense

    [ad_1]

    But if you have some flexibility around where to live, there are cities and neighbourhoods in Canada where homes can be had for less than seven figures—lots of them, in fact. All but five of the 45 cities and regions analyzed by our partner Zoocasa in this year’s Where to Buy Real Estate in Canada report had benchmark prices below $1 million (as of the end of 2023).

    See the list of Canadian cities and regions below, in order of most to least affordable (followed by neighbourhood data for Toronto and Vancouver). You can sort the data in each table by tapping on the column headers, or filter results using the last row. You can download the data to your device in Excel, CSV and PDF formats. 

    Canadian cities and regions with a benchmark price under $1 million

    Prohibitively high prices around Greater Toronto and B.C.’s Lower Mainland can obscure the fact that the national average home price was a tad under $735,000 in 2023, according to the benchmark Zoocasa used in its analysis.

    And even in the regions with benchmark prices above the $1-million threshold, the survey demonstrates there are more affordable neighbourhoods to be found. It should be noted our statistics do not differentiate between housing types, so don’t expect to find detached homes for these prices in these cities. But it’s still possible to get a toehold in the market with a condo or townhouse for less than $1 million, sometimes a lot less.

    You’re 2 minutes away from getting the best mortgage rates in CanadaAnswer a few quick questions to get a personalized rate quote*You will be leaving MoneySense. Just close the tab to return.

    Where to get a home for less than $1 million in Toronto

    Our survey turned up no less than 106 neighbourhoods in the city of Toronto with benchmark prices below $1 million—the most affordable being Tandridge, with a benchmark price of just $484,269.

    Toronto neighbourhoods

    With prices like those, you might assume there’s something wrong with these neighbourhoods. Consider that a lot of them are coming up in the world. Tandridge, along with Rivalda Heights, Keelegate, Humbergate, Cook Village, Duncanwoods, Morningside, Woodbine Downs, South Steeles, Glenfield, Chapel Glen, Dorset Park, Glen Long and Mount Olive have all seen price appreciation of 50% or more over the past five years. Yorkwoods and University Village have both gone up more than 80%, and Beaumond Heights, an astonishing 113%!

    Beyond those in the city of Toronto, we count an additional 65 neighbourhoods across the Greater Toronto Area where the benchmark price was below $1 million at the end of 2023.

    Greater Toronto Area neighbourhoods

    How much would a typical home in Toronto’s Tandridge neighbourhood cost you in monthly mortgage payments? Using a mortgage payment calculator, we find that with the minimum down payment of $24,213 and a mortgage of 25 years, you’d be looking at a monthly payment of $2,685—based on the lowest available five-year fixed mortgage rate on June 13. Add in taxes, insurance and fees, and you’d need a total of $40,706 in cash to close the deal. With 20% down ($96,854), the monthly payment would be $2,240 on a 25-year amortization.

    Where to get a home for less than $1 million in Vancouver

    In the city of Vancouver, which represents less than one-quarter of the Metro Vancouver population, we counted just six enclaves with benchmark prices under $1 million.

    [ad_2]

    Michael McCullough

    Source link

  • CrowdStrike Holdings, Inc. (CRWD) Stock Forecasts

    CrowdStrike Holdings, Inc. (CRWD) Stock Forecasts

    [ad_1]

    Market Update: PSA, WTRG, CRWD

    [ad_2]

    Source link

  • Rates are going down—is now a good time to buy a house in Canada? – MoneySense

    Rates are going down—is now a good time to buy a house in Canada? – MoneySense

    [ad_1]

    The housing supply issue is improving

    It comes after some of Canada’s largest cities have seen ballooning home listings in recent months from droves of sellers listing their properties, despite demand from potential buyers not keeping up. That includes the Greater Toronto Area, where new listings last month jumped 21.1% year-over-year, with 18,612 properties put on the market. Calgary and Vancouver have seen similar trends, with new listings rising 18.7% and 12.6%, respectively, year-over-year in May. But home sales declined in all three cities. In Toronto, there were 21.7% fewer sales in May year-over-year, the Toronto Regional Real Estate Board reported Wednesday.

    The board said 7,013 homes changed hands in the month compared with 8,960 in May of last year, which coincided with a brief market resurgence. TRREB president Jennifer Pearce said homebuyers were waiting for “clear signs” of declining mortgage rates before going ahead with purchasing a property.

    “Typically when rates go down, prices go up.”

    The effects of the rate cut on the housing market in Canada

    “As borrowing costs decrease over the next 18 months, more buyers are expected to enter the market, including many first-time buyers,” she said in a press release. “This will open up much needed space in a relatively tight rental market.”

    Around 56% of Canadian adults who have been active in the housing market said they have been forced to postpone their property search since the Bank of Canada began raising its key lending rate from near zero in March 2022, according to a Leger survey earlier this year commissioned by Royal LePage. Among those waiting on the sidelines, just over half said they would resume their search if interest rates went down, including one-in-10 who indicated a 25-basis-point drop would be enough for them to jump back in.

    You’re 2 minutes away from getting the best mortgage rates in CanadaAnswer a few quick questions to get a personalized rate quote*You will be leaving MoneySense. Just close the tab to return.

    Canadian home buyers waiting for cuts

    “There certainly is pent-up demand,” said Karen Yolevski, chief operating officer of Royal LePage Real Estate Services, in an interview. “Typically when rates go down, prices go up. So this would be the time where people come off the sidelines, knowing and anticipating that prices are likely to rise.”

    In the Greater Toronto Area, the average selling price of a home was down 2.5% year-over-year to $1,165,691 last month. There were 2,701 sales in the City of Toronto, a 17.3% decrease from May 2023, while throughout the rest of the GTA, home sales fell 24.3% to 4,312.

    In general, buyers have been looking for some positive signs,” said Scott Ingram, a sales representative with Century 21 Regal Realty in Toronto. “The sentiment effect of this always punches above the actual dollar and cents. When people are looking for any bit of good news, they’ll take it.”

    [ad_2]

    The Canadian Press

    Source link

  • Mortgage broker vs. bank—which will save you more money? – MoneySense

    Mortgage broker vs. bank—which will save you more money? – MoneySense

    [ad_1]

    For most Canadians, using a broker is the wisest choice to save money, as they have access to a wider selection of products and should have more experience in going through the application process than you do. 

    However, not all brokers are made the same. Some specialize in mainstream lenders, others are more familiar with getting you a mortgage if you have impaired credit, while others tend to source mortgages for investment properties. Again, ask around, search online. Look at reviews and get referrals if you can.

    What to do before signing a mortgage contract

    Before signing your mortgage contract it’s worth reading the fine print, to make sure everything’s above board. Are you getting the interest rate you signed up for? What about the cost of any lender fees, like an arrangement or booking fee? 

    One important aspect is your “prepayment privilege,” which means how much you’re able to overpay your mortgage every month, shortening the time it takes to pay off the loan. It’s good to know where you stand, because by paying too much you can be charged a prepayment penalty, which makes paying it off faster not worth it.

    Buyers should view a survey of the property before signing the contract, as this can reveal if there are any issues with the home they’d need to deal with, and could even justify a renegotiation on the price. Surveys reveal the boundary of the home, so you have an idea of where you’re allowed to build on. In Canada most sellers take out the survey, known as real property reports (RPRs), and they should be scrutinized before you sign on the dotted line.

    If you’re buying a condominium—often the most affordable option in cities—you’ll want to review documents on how it’s run. Generally you join a condominium corporation where you have to pay fees which are used to manage common areas of the building, so it’s a good idea to know what you’re getting into.

    In the contract you should make sure any verbal agreements are in writing. For example if the seller informally agreed to leave some furniture as part of the purchase it’s best to make this official, just in case you get a nasty surprise when you move in.

    When getting a mortgage it’s important to make sure you don’t overburden yourself and have a backup plan if something goes wrong. Like, could you afford to repair a major leak if that happened? Do you have a plan of action on how you’ll be able to repay the mortgage if you lost your job? In some cases the latter issue can be mitigated by either taking out insurance, or using a guarantor when applying for a mortgage. 

    [ad_2]

    Ryan Bembridge

    Source link

  • How much income do I need to qualify for a mortgage in Canada? – MoneySense

    How much income do I need to qualify for a mortgage in Canada? – MoneySense

    [ad_1]

    Fredericton: Home prices poised to rise with rate cuts

    Fredericton marks the third and final city where the additional required income to purchase a home remains below $1,000. The average home price there rose $2,600 on a monthly basis to $292,900, which pushed the minimum income up by $430, to $68,170. According to CREA, Fredericton home sales declined 15.2% over the course of the month.

    This reflects real estate trends in New Brunswick as a whole, as home prices have steadily increased over the past three months. This is mainly due to shrinking supply, as new listings remain 12.1% below the five-year average for March. However, sales and supply could be poised to perk up should interest rate cuts materialize later this summer.

    You’re 2 minutes away from getting the best mortgage rates in CanadaAnswer a few quick questions to get a personalized rate quote*You will be leaving MoneySense. Just close the tab to return.

    The least affordable places to buy in Canada

    Toronto, Hamilton and Vancouver sit at the bottom of the list.

    Toronto: The toughest place to buy a home in March

    It should come as no surprise that Toronto home buyers are the most financially squeezed; home prices there escalated sharply over the pandemic’s lockdown years, and remained elevated at an average of $1,113,600 in March, up $19,700 from February. That resulted in the average buyer needing an annual income $3,400 higher than they did in February, making it now $217,500.

    While home sales have chilled slightly at the start of the year, the Toronto Regional Real Estate Board (TRREB) says enough competition remains in the market to push prices higher, and that this will only tighten further as interest rates start to decline.

    Source: Ratehub

    Hamilton: Another challenging Golden Horseshoe market

    The City of Hamilton—which boomed in popularity in recent years as a real estate destination—came in second in terms of worsening affordability. The average home price does remain under the $1-million mark, making it a much more affordable option when compared to neighbouring Toronto. But that gap is narrowing sharply, up by $14,600 in March to an average of $850,500. In terms of income, a Hamilton buyer needs to earn $169,640 annually, an increase of $2,540.

    Vancouver: Softening sales, but demand still drives prices

    The City of Vancouver remains Canada’s most expensive housing market, with an average price of $1,196,800 in March, up $13,500 from the previous month. As a result, a buyer there must earn $232,620 in order to qualify for the required mortgage, an increase of $2,270 compared to February.

    [ad_2]

    Penelope Graham

    Source link

  • Need help with missed mortgage payments in California? Apply soon: Money is running out

    Need help with missed mortgage payments in California? Apply soon: Money is running out

    [ad_1]

    Did a pandemic-related financial crunch leave you with mortgage troubles? The state may be able to help, but not for much longer.

    The California Mortgage Relief Program offers up to $80,000 to low- and moderate-income homeowners hurt financially by the pandemic who missed mortgage payments, deferred some monthly installments or have overdue property taxes. Having awarded more than $823 million of its $1-billion budget, however, the program could run out of money in a couple of months, state officials say.

    So far, the program has helped more than 33,500 homeowners across the state, most of whom have incomes at or below their county’s median. The aid isn’t a loan, but a payment made on the borrowers’ behalf to clear their mortgage or property-tax debt so they can keep their home.

    “When you look at who received those funds, it’s been a real success,” said Rebecca Franklin, president of the California Housing Finance Agency’s Homeowner Relief Corporation. By using about 75% of the funds to help families earning no more than their county’s median income, and 55% of the money in communities that are historically disadvantaged, “we really were successful at getting the money to those populations who really were hit harder by the pandemic,” she said.

    “We weren’t trying to help everybody. We were trying to focus the funds on those who needed it the most” — and the ones who couldn’t afford to become homeowners again if they were foreclosed on, considering the state’s current housing market, Franklin said.

    The 2021 American Rescue Plan Act put almost $10 billion into a Homeowners Assistance Fund to help prevent low- and moderate-income Americans suffering pandemic-related financial hardships from losing their homes. California was one of the first states to use HAF dollars to launch a mortgage relief program, said Stacey Tutt, homeowner assistance fund coordinator and senior staff attorney at the National Housing Law Project.

    During the Great Recession, Tutt said, distressed homeowners often avoided foreclosures through loan modifications. But during the pandemic, rising interest rates and property values left many homeowners unable to obtain modifications that reduced their monthly payments.

    The Homeowners Assistance Fund was “essential to keeping people in their homes,” she said, adding, “I can’t imagine what our housing market would look like right now without these HAF dollars getting out the door.”

    “As someone who has watched HAF be implemented across the country … I do think California did an amazing job,” Tutt said. Not only was California one of the first states to mortgage relief dollars out to homeowners, she said, it also expanded the program to more types of relief as needs evolved.

    State assistance is available to qualified homeowners who’ve missed at least two mortgage payments by Feb. 1 and are still in arrears, or who’ve missed at least one property tax payment by Feb. 1. Various restrictions apply, but the main ones are that aid is available only for owner-occupied homes and that an applicant’s total household income must be no more than 150% of the area median income. In Los Angeles County, that’s $132,450 for an individual and $189,150 for a family of four.

    Even if you do not qualify for a grant — your mortgage may be too large, for example — the state program has provided grants to legal service organizations and housing counselors to help you navigate your way to a solution, Franklin and Tutt said.

    Here are more details on who’s eligible for a grant, how to apply and what’s covered.

    Who qualifies for relief?

    Under federal law, households earning up to 150% of the median income in their county who suffered a pandemic-related financial hardship are eligible for up to $80,000 in relief. The limit rises as the number of people in your household increases; to find the limit for your household, consult the calculator on the program’s website.

    The program defines a financial hardship as either reduced income or increased living expenses stemming from the COVID-19 pandemic. According to its website, qualifying expenses include “medical expenses, more people living in the household or costs for utility services.”

    There are a few more limitations, however:

    • The home in question must be your principal residence.
    • You may own only one property, although it may have up to four units on it.
    • Your mortgage may not be more than $80,000 in arrears. The program can’t make partial payments on your debt.
    • If you’ve already paid off your mortgage or tax debt, you can’t recoup that money by applying for state aid.
    • You will not qualify if your mortgage is a “jumbo” loan bigger than the limits set by Fannie Mae and Freddie Mac.
    • You can’t obtain the state’s help if you have more than enough cash and assets (other than retirement savings) to cover your mortgage or tax debt yourself.
    • Your mortgage servicer must be participating in the program.

    What kinds of help are available?

    The program will cover past-due mortgage payments and property tax debt for eligible households, but it doesn’t stop there. Funds also can be used for:

    A second shot of relief. The mortgage relief program was originally seen as one-time-only assistance. Now, however, California homeowners who’ve already received help can apply for more if they have missed more payments and remain eligible. No household may collect more than $80,000 over the course of the program.

    Reverse mortgages. Homeowners with reverse mortgages can apply for help with missed property tax or home insurance payments.

    Partial claim second mortgages and deferrals. This applies to certain borrowers who fell behind on loans backed by the Federal Housing Administration, the U.S. Department of Agriculture or the Department of Veterans Affairs. Rather than demanding larger payments to cover the past-due amount, the agencies encouraged lenders to split off the past-due portion into a second, interest-free mortgage called a partial claim. That way, a borrower could stay current by paying just their usual monthly payment.

    The partial claim second mortgage could be ignored until the house was sold, the mortgage was refinanced or the first mortgage was paid off, at which point the partial claim would have to be paid in full. In the meantime, it’s a real debt that affects the borrower’s ability to obtain credit.

    Similarly, some lenders offered deferrals that bundled the missed payments into a sum that was tacked on to the end of the loan. Borrowers wouldn’t face higher monthly payments, but they would have to pay off the deferred amount (a “balloon payment”) when they refinanced, sold their house or reached the end of their loan.

    The mortgage relief program offers up to $80,000 to pay all or part of a COVID-related partial claim or deferral received during or after January 2020.

    How do you apply?

    Applications are available only online at camortgagerelief.org. For help filling one out, you can call the program’s contact center at (888) 840-2594, where assistance is available in English and Spanish.

    If you don’t have access to the internet or a computer, you can ask a housing counselor to assist you. For help finding a counselor certified by the federal Department of Housing and Urban Development, call (800) 569-4287. You may also get help from the company servicing your mortgage.

    The online application process starts with questions to determine your eligibility. If you meet the state’s criteria, you can complete an application for funds. Here’s where you will need some paperwork to establish how much you earn and how much you owe.

    According to the program’s website, among the documents you will need to provide are a mortgage statement, bank statements, utility bills and records that show the income earned by every adult in your household, such as pay stubs, tax returns or a statement of unemployment benefits. If you don’t have access to a digital scanner, you can take pictures of your documents with your phone and upload the images.

    You’ll also need to provide a California ID or a Social Security number.

    The site provides links to the application in English, Spanish, Chinese, Korean, Vietnamese and Tagalog.

    Who has received aid?

    According to statistics kept by the program, about three-fourths of the money has been used to help households at or below the area median income. In fact, half of the funding has gone to families whose incomes are no more than 30% of the area median, which in L.A. County would be about $26,500 for a single person or $37,830 for a family of four.

    About 52% of the aid has gone to Latino and Black Californians, who together make up about 29% of the state’s homeowners.

    The money will be awarded on a first-come, first-served basis, with two important caveats: According to the California Housing Finance Agency, 60% of the aid must go to households making no more than the area median income, and 40% must go to “socially disadvantaged homeowners.” Those are residents of the neighborhoods most at risk of foreclosure, based on the Owner Vulnerability Index developed by UCLA’s Center for Neighborhood Knowledge.

    [ad_2]

    Jon Healey

    Source link

  • Don’t get stuck on financial advice that doesn’t ring true – MoneySense

    Don’t get stuck on financial advice that doesn’t ring true – MoneySense

    [ad_1]

    Dividends are after-tax profits a company distributes among its shareholders, typically every quarter, and can be paid in cash or a form of reinvestment.

    Heath said a company that pays a high dividend reinvests less of its profit into growth, potentially losing out on opportunities to up its market value. In Canada, stocks with high dividends come from a narrow slice of the stock market—banks, telecoms and utilities. 

    “Ideally, an investor should consider a combination of stocks with high and low dividends to have a well-diversified portfolio,” he said.

    Contribute to RRSP, save on taxes

    “There’s a lot of taxpayers, investment advisers and accountants who really promote the concept of putting as much into your (registered retirement savings plan) as you absolutely can,” said Heath.

    As a financial planner, he thinks the contrary. Heath says using RRSP contributions to get the biggest tax refund possible is not necessarily the best approach for people in low tax brackets and can hurt them in the long run when they withdraw those savings at a higher tax bracket in retirement.

    “Sometimes, it’s OK to pay a little bit of tax, as long as you’re paying at a low tax rate,” he said.

    Instead, tax-free savings account (TFSA) contributions could be better for someone with a low income. 

    It can be wise to use the low tax bracket by taking RRSP withdrawals early in retirement, even though it might feel good to withdraw only from your TFSA or non-registered savings and keep your taxable income low. 

    [ad_2]

    The Canadian Press

    Source link

  • Williams-Sonoma, Inc. (WSM) Stock Forecasts

    Williams-Sonoma, Inc. (WSM) Stock Forecasts

    [ad_1]

    Analyst Report: Williams-Sonoma, Inc.

    [ad_2]

    Source link